What's Old is New Again in the Computer Biz

The December 2004 issue's cover story, "Software Shake-up," analyzes the aftershocks reverberating through the distribution software business after a truly staggering amount of consolidation over the past few years.

While researching this article, Electrical Wholesaling's editors were shocked at how many software companies have been acquired recently. Through conversations with distribution software industry insiders and analysis of the news coverage of software firm acquisitions in Electrical Wholesaling and Electrical Marketing newsletter, Managing Editor Sarah Dolash discovered that three giants now control much of the business: Prophet 21 Inc., Yardley, Pa.; Intuit Eclipse, Shelton, Conn.; and Infor Global Solutions, Alpharetta, Ga. (through an acquisition of NxTrend, Colorado Springs, Colo.).

Mergers and acquisitions aren't new to the distribution software business; it has seen its share over the past 20 years. But few of the companies that sold business systems when electrical distributors first started to computerize their businesses in the late 1970s and early 1980s are still in existence today. EW's June 1984 cover story said, “There are from 15 to 25 software packages now on the market that target the electrical distributor specifically, compared with a mere handful a few years ago.”

That issue also listed 69 vendors that offered computer software and hardware. On that list were some familiar industry names from that era, such as Dimis, Ultimate Data Systems, Endata and Automated Data Processing (ADP), as well as several dozen smaller vendors that provided just software, hardware or consulting services. Interestingly, the only company from that list operating under the same name is Prophet 21.

For distributors that didn't want to invest in computer systems, some companies on this listing offered time-sharing arrangements, where users would share access to computers at a service firm.

In the 1980s, distributors could also let “service bureaus” handle their data processing needs, and would farm out payroll processing, accounts receivable, accounts payable and general ledger reports. In this arrangement, the EW article said, “Data is picked up on a regular basis from the distributor, processed by the service firm and returned by messenger.” The industry certainly has come a long way!

Or has it? Today's software packages are light years ahead of the earliest data processing systems in inventory management, and they can slice and dice the data in many more ways than those old systems. But a surprising amount of the basic billing, accounting and back-office data that distributors need to run their businesses is basically the same. It's just delivered differently today than in the past.

Whether human messengers deliver the data distributors need to run their businesses, or you can get the same basic information with a few clicks of a mouse and let the software perform instantaneous calculations to deliver it on-screen, in some ways, it's not all that different. I find that kind of refreshing.

EW WELCOMES ALLEN RAY AS CONTRIBUTING WRITER

One source for this month's cover story was Allen Ray, president, Allen Ray Associates, Arlington, Texas. You will be hearing more from Allen in 2005 in his new role as Contributing Writer for EW. He will be writing articles for the magazine on trends in distribution software.

With 35 years in the electrical wholesaling industry, Allen knows the business inside and out. Before starting his own consulting firm to help distributors improve their profitability, he worked for Trade Service Corp.

Allen can also empathize with family-owned companies in the electrical business, as he worked for his family's electrical distributorship. Allen is a graduate of Texas A&M University's Industrial Distribution program.